Wholesaling investment properties entails a high degree of trust, more so than in other areas of real estate. What accounts for this emphasis on trust? The nature of wholesaling involves spotting a good deal before anybody else does, getting the deal under contract, and then assigning the contract to another investor. The investor must trust in your abilities as a wholesaler to know what will sell and how much potential profit there is to be made with perhaps minor renovations. If you pick out properties that make the investors’ profit, you will start to build a name for yourself. However, if you take advantage of investors, word will spread and your reputation will be tarnished. The real estate world can be very close knit and investors know to ask about wholesalers. The most important thing you can do to promote long term wholesaling is to earn a great reputation of supplying good deals.
The investor believes in your foresight and responsible work-up of properties when he or she agrees to buy a property that you’ve found. It is vitally important that you provide the evidence that the property you are selling to an investor will indeed make a profit. Falsely leading an investor to the conclusion that a poor performing property is actually good is not only unethical, but will come back to bite you. Of course, you do not have to be a magic genie: it is entirely understandable if your predictions do not come true, because after all, they are only predictions. This is the assumed risk the investor takes in listening to your advice. However, as a wholesaler, those predictions need to be based in evidence and not wishful thinking.
If you find yourself with a property that is not as profitable as you once believed, it is better to assume the loss yourself or back out of the contract than to pass it on to your investor. If you sell a property to an investor that tanks, other investors are going to know what happened. Word travels on the street! Investors understand assessing future potential is risky, but they also know when a wholesaler takes advantage of a new and inexperienced investor. Investors have access to the same data that you do, and if they come to the conclusion that your property work-up was negligent or misleading, you’re done. They will no longer trust your judgments and no longer buy your properties, leaving you no choice but to go out of business. Before you go into wholesaling, make sure to understand the importance of reputation to owning a long-term business and don’t sell anything unethically.
Tell us what you think by leaving a comment. If you would like to be notified when new posts are made to this site, be sure to subscribe to the RSS feed.
IndianaInvestmentPropertyGroup.com
InvestmentPropertyMadeEasy.com
Based out of Indiana, Jay Redding is a real estate entrepreneur, with experience in single family and multi-family investing.
